What Factors Affect My Social Security Retirement Benefits?

As you begin planning for your retirement, you may want to include the amount of benefits you can expect to receive from Social Security in your calculations. The ultimate amount of benefits you will receive is dependent on many factors, including:

How long you work. In order to receive Social Security benefits, you have to work long enough to earn sufficient credits to begin receiving benefits. You earn credits by paying Social Security taxes on your wages. You currently need 40 credits — the equivalent of 10 years of work — to be eligible for retirement benefits. Wages that are not subject to Social Security taxes do not earn credits towards benefits. The more credits you earn, the more you can expect to receive.

How much you earn. Wage earners who make more throughout their lifetimes can expect to receive more benefits than those who earned less. The Social Security Administration bases benefits on the average lifetime earnings, which usually means they average the highest earning 35 years of the wage earner to come up with the benefit amount. If there were years when you did not work, or times where you earned less, this can reduce your average lifetime earnings and lower your benefit amount.

When you retire. As long as you have earned enough credits, you can begin collecting retirement benefits at age 62. However, if you begin taking the benefits before you reach your full retirement age, the amount you receive will be permanently reduced. Currently, the full retirement age for people born before 1938 is 65. For those born in 1938 or after, the full retirement age is scaled between 65 and 67, depending on the month and year of your birth. If you choose to delay retirement, you can continue earning credits towards your benefits up until you reach the age of 70, which will result in receiving more once you retire.

If you continue working. If you begin receiving retirement benefits before your full retirement age and continue to work during this time, the amount you receive may be reduced, based on the amount you earn. However, if you wait until full retirement age and elect to begin receiving your benefits at that time, you still can continue to work and it will not affect the amount of benefits you receive.

If you receive a pension. If you receive a pension that you did not pay Social Security taxes on, it may reduce the amount of Social Security benefits you receive each month.

If you want a more exact estimate of the amount of Social Security benefits you will receive upon retirement, you can refer to your Social Security Statement, which you receive annually from the Social Security Administration. The statement will provide an estimate of the amount of benefits you will receive based on the work you have completed so far. However, it is important to note that the estimates provided in the statement are based on the premise that you will continue working until age 62. If you are planning to stop working before you reach 62 or after, the amount on your statement will not be accurate.

You also can use the Social Security Benefit Calculator, available at www.socialsecurity.gov, which calculates your retirement amount based on current law and your real-time earnings. The Social Security Administration provides calculators for disability and survivor benefits as well.

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